Disclaimer: this advice is presented based on factual research, advice from leading professionals/organizations, and the experience of others. I have not personally engaged in buying or selling authorized user tradelines.
If you have good credit, selling an authorized user tradeline can seem like a great way to make extra cash. But doing so could irreparably damage your credit.
How An Authorized User Tradeline Works
An authorized user is someone who has purchasing permissions on a credit card but is not liable for payment. Only the primary cardholder is responsible for repayment.
For example, if you added your college student as an authorized user to your credit card account, they would receive their own card that they could use to rack up charges. But only you, the primary cardholder would be responsible for paying the credit card balance, regardless of who made the actual purchases.
The purpose of adding someone like this as an authorized user is to help them build credit. By becoming an authorized user, they get an authorized user tradeline added to their credit profile. This can help them to generate an initial credit score, and/or improve a low credit score.
How to Sell Authorized User Tradelines
To exploit the ease of using authorized user tradelines to build credit, there are now credit repair companies that sell authorized user tradelines.
These credit repair services pair those with good credit who are looking to sell authorized user slots with those who are looking to improve their credit.
On the buying side, they charge you based on the qualities of the credit card. The higher the credit limit and the longer the card has been open, the better.
For credit cards with limited credit lines and credit history, an authorized slot may sell for as little as $200. For credit cards with extensive credit history and a high credit limit, a single authorized user slot can sell for $1000 or more.
What Happens When Someone Purchases a Slot on Your Credit Card
$1000 for a single slot on a single card sounds great! Just think of all the money you can earn....but don't forget the broker's cut. Even though the broker may charge the customer $1000 or more for that tradeline, the highest commission they may be willing to pay you is $350.
And, you'll need to do all the work. Once the slot is sold (you can sell multiple slots on a single card), you'll need to contact your credit card company to add an authorized user(s). Then, a month or two after you added them, you'll need to contact your credit card company again to remove them. You get to keep the authorized user card; it never gets sent to the purchaser.
Making up to $350 a slot still isn't that bad, but consider the fact that the tradeline company just made $650 for doing nothing more than listing your credit card on their website.
The Risks of Selling Authorized User Tradelines
If you have 3 credit cards, and you averaged a $200 commission from each of them once every 3 months, then you could potentially earn $2,400 in a year, for not a whole lot of work.
And if you had more credit cards and sold multiple slots on each card every month or two, then you could start raking in the cash.
But this is where is starts to get risky.
Selling tradelines is not illegal. At least not yet.
But the practice of selling tradelines does violate the credit card company's terms of service. You know, that fine print that no one ever reads.
If the credit card company suspects that you are using their product to make money yourself by selling authorized user slots, they could take action against you.
This could include suspending your access to adding authorized user tradelines, reducing your credit limit, or closing your account entirely.
And, on the buying side, if FICO, the company that invented credit scores, views an authorized user tradeline as potentially fraudulent, they can omit it from credit score calculations. This will likely result with the customer requesting a refund and you receiving $0 commission.
So, the more often you add an remove authorized user tradelines, the higher the likelihood you'll be caught by the credit card company or FICO.
How Selling Authorized User Tradelines Damages Your Credit Score
If you are selling authorized user tradelines, then you likely already have decent credit yourself.
But, if you get caught up in this money making scheme, and the credit card companies begin taking negative action against you, this will damage your credit score.
If a credit card company lowers your credit limit, this will increase your credit utilization. The higher this raises your overall credit utilization, the bigger the dent to your credit.
If a credit card company completely closes your account, this will have a much bigger and immediate impact on your credit. Once an account is closed, you no longer benefit from the credit limit and your length of credit history will take a hit.
Depending on your credit, closing a single account could cause a minor decrease to your credit score (less than 20 points) or result in a significant score decrease (more than 50 points).
If you are selling authorized user slots for all of your credit cards, and all the credit card companies cracked down on you, then the damage to your credit score could be drastic.
Without these cards reporting on your credit, you could find the amounts owed, length of credit history, and credit mix portions of your credit score suffering. These three factors alone make up 55% of your credit score.
Is Selling Authorized User Tradelines Worth It?
Can you make money selling authorized user tradeline slots? Yes.
Is it worth irreparably damaging your credit for an extra $3k a year. Probably not.
If you have good credit, and a lot of credit cards, then perhaps it is worth the risk to sell authorized user slots on one or two of them. But only choose credit card accounts that you are willing to lose, and avoid selling slots too often.
Otherwise you risk falling to the allure of the 'get rich quick scheme' type of authorized user sales.
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